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Image courtesy of Total.

France’s Total became the first major international oil firm to sign a development deal with Iran since Western sanctions were lifted earlier this year.

Total signed a Heads of Agreement (HoA) on Tuesday with the National Iranian Oil Company (NIOC).

The deal covers the development of phase 11 of South Pars, the world’s largest gas field.

The South Pars 11 project (SP11) will have a production capacity of 1.8 billion cubic feet per day, or 370 000 barrels of oil equivalent per day.

The produced gas will be fed into Iran’s gas network, Total said.

Under the terms of the HoA, NIOC and the project partners will conduct exclusive negotiations to finalize a 20-year contract in accordance with the technical and economic terms established in the HoA.
The HoA will be within the framework of Iranian Petroleum Contract that was recently approved by the Iranian Parliament.
Iran retooled its tender contracts earlier this year to allow the potential full recovery of costs over the span of nearly 20 years.
The SP11 project will be developed in two phases.
The first phase will consist of 30 wells and two well head platforms connected to existing onshore treatment facilities by two subsea pipelines.
Total said the first phase of the development will cost an estimated $2 billion.
At a later stage, a second investment phase will be launched once that phase is required by reservoir conditions.

The later stage will involve the construction of offshore compression facilities, Total said.

Total said it will also launch engineering studies and a call for a tender process so that construction contracts can be awarded immediately upon signing the final agreement.
Total will operate the SP11 project with a 50.1 percent interest.

Petropars, a fully owned subsidiary of NIOC, will hold a 19.9 percent stake and China’s CNPC will hold a 30 percent stake.

“Following Total’s successful development of phases 2 and 3 of South Pars in the 2000s, the Group is back to Iran to develop and produce another phase of this giant gas field. Total is delighted to have been selected by NIOC – it is a recognition of both our technical expertise and the partnership the Group has built with Iran over the years,” Total CEO and chairman Patrick Pouyanné said.

Iranian officials have been seeking billions of dollars in investment to boost production back up to pre-sanction levels.

Iran’s focus on growing production scuttled two attempts to seal an OPEC production deal earlier this year.

Iranian officials have said they will not consider participating in a proposed production plan until the country’s production rises to about 4 million barrels per day.

Strong demand from Asia helped boost Iranian production ticked up to a post-sanctions high of 3.67 million bpd in October, according to S&P Global Platts.